Owners may sell their property for below it's market value for a number of reasons. Here are a few:
- The property is in need of repair.
- Imminent foreclosure.
- Sudden relocation.
- The owner inherited a property that has become burdensome.
- Personal emergency that requires immediate funds.
In some cases when an owner considers the cost of selling a home through traditional means he/she may decide to sell at a discount since it may actually result in more money to them. Discounted properties are sought-after by investors and cash buyers who are often willing to pay all closing costs and close in days rather than months. The result is a much cheaper transaction for the seller and less time on the market. These factors can lead to an owner receiving about the same or even more money by selling below market. Here's an example:
Consider a property that has a market value of $200,000. Let's look at two scenarios; the first where the home is sold using an agent for $200,000 and the second where the home is sold directly to a buyer or investor for cash for $180,000.
|Closing costs +
||-$0 (paid by buyer)
|Interest & Taxes *
+ Closing costs include title fees, title insurance, seller concessions etc.
* Interest and taxes were calculated assuming annual property taxes of $5,000 and monthly mortgage interest of $800. The conventional sale is assumed to take 90 days to list and sell with the discount sale taking 14 days.